investor presentation - solaris oilfield/media/files/s/solaris...2020/06/01 · operations,...
TRANSCRIPT
Investor PresentationJune 2020
Disclaimer
2
Forward-Looking Statements
The information in this presentation includes “forward-looking statements.” All statements, other than statements of historical fact included in this presentation, regarding our management, strategy, future operations, financial position, estimated revenues and losses, projected costs, prospects, plans and objectives of management are forward-looking statements. When used in this presentation, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These forward-looking statements are based on Solaris’ current expectations and assumptions about future events and are based on currently available information as to the outcome and timing of future events. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements described under the heading “Risk Factors” included in Solaris’ Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 18, 2020 and subsequent Quarterly Reports, including the Form 10-Q filed with the Securities and Exchange Commission on May 1, 2020. We caution you that these forward-looking statements are subject to all of the risks and uncertainties, most of which are difficult to predict and many of which are beyond our control, incident to the transportation, storage and delivery of proppant. These risks include, but are not limited to, the level of domestic capital spending by the oil and natural gas industry natural or man-made disasters and other external events that may disrupt our manufacturing operations, volatility of oil and natural gas prices, changes in general economic and geopolitical conditions, large or multiple customer defaults including defaults resulting from actual or potential insolvencies, technological advancements in well service technologies, competitive conditions in our industry, our ability to fully protect our intellectual property rights and changes in the long-term supply of and demand for oil and natural gas. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.
You are cautioned not to place undue reliance on any forward-looking statements, which speak only as of the date of this presentation. Except as otherwise required by applicable law, we disclaim any duty to update and do not intend to update any forward-looking statements, all of which are expressly qualified by the statements in this section, to reflect events or circumstances after the date of this presentation.
This presentation includes financial measures that are not presented in accordance with generally accepted accounting principles ("GAAP"), including EBITDA and Adjusted EBITDA. While management believes such measures are useful for investors, they do not have any standardized meaning and are therefore unlikely to be comparable to similar measures presented by other companies. The presentation of non-GAAP financial measures should not be used as a replacement for, and should not be considered in isolation from, financial measures that are in accordance with GAAP. Please see the Appendix for reconciliations of those measures to comparable GAAP measures.
Industry and Market Data
This presentation has been prepared by Solaris and includes market data and other statistical information from third-party sources, including independent industry publications, government publications or other published independent sources. Although Solaris believes these third-party sources are reliable as of their respective dates, Solaris has not independently verified the accuracy or completeness of this information. Some data are also based on the Solaris’s good faith estimates, which are derived from its review of internal sources as well as the third-party sources described above.
Trademarks and Logos
Solaris owns or has rights to various trademarks, service marks and trade names that is uses in connection with the operation of its business. This presentation also contains trademarks, service marks and trade names of third parties, which are the property of their respective owners. Solaris’ use or display of third parties’ trademarks, service marks, trade names or products in this presentation is not intended to and does not imply, a relationship with Solaris or an endorsement or sponsorship by or of Solaris. Solely for convenience, the trademarks, service marks and trade names referred to in this presentation may appear without the ©, ®, TM or SM symbols, but the omission of such references is not intended to indicate, in any way, that Solaris will not assert, to the fullest extent under applicable law, its rights or the right of the applicable owner of these trademarks, service marks and trade names.
2 7
40
123 113
17
(26)(6)
(67)(45)
80
40
2015 2016 2017 2018 2019 2020E
EBITDAFCF
Ticker SOI (NYSE)
IPO Date May 11, 2017
Market Cap(1) ~$300 million
Long-term Debt(2) $0.0 million
Cash Balance(3) $55.0 million
Solaris at a Snapshot
(1) As of 5/26/20, estimates reflect Bloomberg Consensus (2) As of 3/31/20(3) As of 4/30/20(4) Estimated as of 3/2/20
Ownership (4) EBITDA and FCF (1)
$ in millions
3
Stock Info
Investment Highlights
Market Leader: Industry leading market share of ~1/3
No Debt: No debt on the balance sheet with >$1.20 per share cash balance as of April 30, 2020
Positive FCF: Positive free cash flow generation began in 2019
Dividend: Quarterly dividend of $0.105/share; 7th consecutive dividend declared
Share Buybacks: Stock repurchase program of $30MM recently completed, which retired 2.6mm shares or 5% of outstanding shares
Growth: New product introductions and continued innovation
Inside Ownership: Management team members are mostly original founders and own ~17% of the company
Chemical System
Proppant System
Management17%
Yorktown20%
Other1%
Float 62%
Over Half of FCF To Date has been Designated for Shareholder Returns**
Source: Company data* Excludes impact of Transload agreement termination payments** Q1 2019 through Q1 2020
4
Cash Flow Generation
Solaris Began to Harvest Cash in 2019Debt-free Balance Sheet Supports High EBITDA to OCF % Conversion*
$ in millions
0%
20%
40%
60%
80%
100%
120%
140%
Q1 18 Q2 18Q3 18Q4 18Q1 19 Q2 19Q3 19Q4 19Q1 20
Average = 83%
Balance sheet41%
Share repurchase
33%
Dividends26%
$4
$24 $29
$59
$23
$34 $31
$26
$12
($41)
($45)
($39) ($36)
($20)
($8) ($4) ($2) ($1)
($5)
($5)
($5)($5) ($5) ($5)
($3)
($27)
($37)
($21)
($10)
$23
$3
$26 $27 $24
$11
($60)
($40)
($20)
$0
$20
$40
$60
Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q4 19 Q1 20
Operating Cash Flow Capex Dividend Share Repurchase Free Cash Flow
Innovative Products & Solutions Comprehensive Services
5
Solaris Delivers Innovative Products & Solutions and Comprehensive Services to the Industry
Mobile Proppant
Management Systems
~1/3 Share of U.S. Wellsite Proppant Storage Market
Field Services and Logistics
Experienced Field Service Team Dedicated to Customer Support
Last Mile Logistics
Turnkey Solution from Sand Mine to Blender
Inventory Management
Software
Real Time Vendor-to-Blender Supply Chain Metrics Help Minimize NPT
Kingfisher Transloading
Services
High-Speed, Unit-Train Capable Transload Facility in SCOOP / STACK
Mobile Chemical
Management Systems
Disruptive New Technology for Wellsite Chemicals
Innovation and Continuous Improvement is a Cornerstone of the Solaris Platform
6
Solaris Has a History of Innovation and Maintains a Robust R&D Pipeline
2014 – 2016Getting Started
Key Milestones
Apr 2014: Solaris is founded
Sep 2014: Acquisition of manufacturing facility and IP
Jul 2015: First 12-pack deployed
Oct 2015: Deployed PropView®
Sep 2016: PropView® mobile app launched
2019+Expanding Solution Offerings
Key Milestones
Jan 2019: First chemical systems deployed
May 2019: Chemical view available as part of Solaris Lens®
May 2019: First wellsite with Solaris Proppant, Chemical and Water silo systems
May 2019: Acid blending technology deployed for Chemical Systems
2017 – 2018Rapid Proppant System Growth
Key Milestones
May 2017: IPO on NYSE
Aug 2017: Kingfisher transload facility groundbreaking
Dec 2017: Railtronix® acquisition
Jan 2018: Non-pneumatic system deployed
Nov 2018: Auto Level Hopper launched
Dec 2018: 160 proppant systems in fleet; 166 expected by end of Q3’19
New Products & Enhancements New Products & Enhancements New Products & Enhancements
Mobile Proppant System Launch Mobile Proppant System Growth Mobile Chemical System
PropView®
Allen-Bradley Control System
New central conveyor belt
Custom tarping system
Solaris Lens®
AutoHopper™
Last mile offering
Non pneumatic system
Chem System testing and refining
Chemical view
Chem System acid blending on the fly
Deep pipeline of new product R&D
29 35 44 5977
98122
146 160 162 164 166
4Q'16 1Q'17 2Q'17 3Q'17 4Q'17 1Q'18 2Q'18 3Q'18 4Q'18 1Q'19 2Q'19 3Q'19E
Select Operator Customers(1) Select Service & Logistics Customers
Solaris has a Broad and Growing Customer Mix
7(1) Includes direct and indirect operator customers
Diverse, Blue Chip Operator and Pressure Pumper Customer Base
Simple, modern, fully-integrated and automated control system
Reliable system with high volume input and output capacity
Mobile and flexible equipment with multiple redundancies
High Capacity Throughput System
8
Supply Chain Savings
2.5 – 5mm lbs of on-site inventory
24 truck offloading points
Smaller truck fleet size required to deliver proppant
Decreased truck demurrage
Well Site Savings
Increased inventory stage execution efficiency
Built-in dust control
Lower labor requirements
Reduced fuel requirements
Proppant inventory loss savings
Increased asset utilizationReal-time inventory levels and consumption rates
Flexibility to Use Belly Dump or Pneumatic Trucks
Belly Dump Truck
Pneumatic Truck
Solaris’ Mobile Proppant Management SystemElegant Solution to a Complicated Problem
24 Offloading Points(4 fill tubes per silo)
Automated Control via AutoHopper™
Enclosed System with Few Moving Parts and
Dust Suppression
Automatically controls pace of sand delivery from silos to blender
Removes need for operator to monitor hopper
Prevents sand spillage and reduces silica dust exposure
Enables enclosure of blender hopper
< 20%
<45%, with wide range by
company & technology
67%
Assumed SandKingUtilization
Implied OtherTechnologyUtilization
Solaris 2019 AverageUtilization
~1/3
520
315
250
400380
330
2014 2015 2016 2017 2018 2019
SOI
Other Technologies
SandKing
2019 Average Utilization Variances Suggest Technology/Service Differentiation
(1) Approximate US Frac fleet count at end of period used to estimate total addressable market for well site sand storage systems
Traditional SandKingtechnology has lost share to boxes and silos, with Solaris’ systems having the fastest market adoption rate and current market share ~1/3
Utilized Well Site Sand Storage Systems by Technology Type(1)
Assumptions:
2019 Avg Demand = 330 Avg Frac Fleets
Available Supply = 166 Avg SOI systems + ~250 box systems + >150 non-SOI silos + >200 SandKings
Source: Company data, Coras Research
9
Solaris Growth Driven by Overall Market Growth Combined with Technology Displacement
0.3%
99.7%
Solaris systems are an insurance policy that costs <$200/hour to save on paying downtime completion spread costs of $5-6k/hour
A 20% rental rate discount offered by a competitor, or $20k/month, gets eroded quickly if downtime is greater than a few hours
Downtime analysis excludes trucking demurrage (truck wait time) charges, which can add significantly to the cost of downtime in some cases
Solaris Uptime Performance Drivers of Performance and Differentiation
System Design Service Quality
Multiple redundancies– no single point of failure
Simple and modular design allows efficient maintenance
Fully automated controls
Solaris Lens ® Software included with rental enables full supply chain visibility
Patent protection
Experienced staff of field technicians respond quickly to customer calls
Active preventative maintenance program
Customer, field, and management level involvement in constant process and design improvement feedback loop
>99% Uptime Performance
Value Proposition is Similar to an Insurance Policy
Source: Company data
Service Quality
10
SOI-Caused NPT
A Key Value-Add to Customers is Service Quality and Uptime Performance
SOI Uptime
Mines/Transloads Trucking Well Site
Solaris Lens® provides real-time inventory levels at every step of the “last mile” supply chain, with visibility both at the well site and remotely via any browser or Solaris’ App
11
Digitalization of the Supply ChainSolaris Lens®: Vendor to Blender Visibility
12
Chemicals, acid, friction reducer, biocide, etc. stored in multiple totes and iso-containers today
Replaced with 3 silos with inventory control and monitoring, precise flow measurement and improved HS&E
Footprint reduced to three Solaris silos
Bringing Order to Chaos…AgainSolaris’ New Mobile Chemical Silo Systems
CONFIDENTIAL
Solaris’ Solution Designed to Address Today’s Challenges
13
Solaris' SolutionToday’s Challenges
Footprint
Product Dosing
Personnel Required
Additional Equipment Required
Inventory Resource Planning
Inventory Capacity
Control System
HS&E
Solaris Chemical System Improves Well Site Safety and Increases Completion Execution
Imprecise, manual metering"Horseshoes and hand grenades"
Multiple (2 - 4) to "strap tanks," open/close valves, fill containers
Chem add unit, iso-containers,totes, acid tanks None. Only Solaris System
"Strapping tanks," dipsticks and hazmat suits; daily top-ups of tanks
50,000 – 60,000 gallons 90,000+ gallons(Gallons / Sq. Ft.: ~12x vs. ISO Tank, ~3x Frac Tank)
Manually operated valves Electronic PLC HMI system with controlled dosing
Guided wave radars with remote monitoring of levels via Solaris Lens® allows just-in-time
ordering of additional chemicals
< 1; operated remotely in data van
Precise - state of the art telemetry and accurate measurement technology
Large and inefficient Condensed and efficient space utilization
Haz mat suits required and leaks/spills more frequent due to numerous connection points
Enhancing well site HS&E with fewer moving parts and reduced human footprint on site
14
Detailed info on pump rates and
ratios
Historical performance
tracking
Accurate real-time inventory monitoring of
each silo / compartment from mobile
device (volume and activity)
Comprehensive summary data
on the Chemical System
Solaris Lens® Also Includes Remote Chemical Inventory Monitoring
0.210.29
2018 2019 YTD
2.72
0.29
2018 2019 YTD
Solaris is Focused on SustainabilityOur ESG Program At a Glance
Solaris Corporate ESG StatementAt Solaris, we aim to be first in service and innovation. One of the principal ways we measure success is by the value we deliver to all our
stakeholders, including our customers, employees, investors and the communities in which we operate. Our goal is to create value by providing products and services that promote operational excellence and safety at the well site, which results in lower environmental impact, improved efficiency and lower total cost for our customers and our communities. We are also committed to transparency, ethics and fairness in how we
manage, operate and report on our business. Solaris Sustainability Website: https://www.solarisoilfield.com/sustainability
TRIR down 90%
LTIR <0.3
Calendar Year TRIR Calendar Year LTIRBy innovating solutions that
improve efficiency, lower emissions, and reduce well site
footprint, we help the oil and gas industry minimize its
environmental impact.
We are committed to operating under the highest legal and ethical standards. Our Board, employees and vendors are expected to abide by our Code of Conduct posted on our website.
15
Social: Safety CultureEnvironmental Commitment
Governance
Solaris Technologies Provide ESG BenefitsReduced Safety and Environmental Risk
16
AutoHopperTM with Cantilever Tarp
LED Lighting and Dust Control
Self-cleaning Dust Collection
LED Lighting
Reduced Safety Risk Through Automation
Small footprint and fewer movements with automated silo systems
Forklifts not used with Solaris systems
AutoHopper™ removes a person from high silica dust exposure area by using machine learning to adjust belt speed to blender demand and camera for remote monitoring
Chemical system can operate automatically off control pad in data van, eliminating a person who typically manually turns knobs
Chemical inventory visibility through Solaris Lens® eliminates need to manually climb on top of tanks to “strap”
Reduced Environmental Risk
Sand and Chemical systems use 100% electric components
Can share power with electric frac fleets, reducing fuel / emissions
No hydraulic fluid to drip/spill
Built-in LED lighting eliminates need for light plants and generators
Dust collection and disposal
Self-cleaning collector at top of each sand silo
Dust collection and disposal above the hopper with AutoHopperTM and cantilever tarp design
Reduced trucks compared to containerized solutions for sand or traditional chemical delivery using totes / ISO tanks
Fewer people on location reduces personal trucks on the road and waste
Solaris’ Mobile Proppant and Chemical Systems Are All-Electric and Integrate Well With Electric Frac Fleets
17
Solaris’ mobile proppant and chemical systems have been electric since inception and have proven to integrate well with electric frac fleets
Majority of competition uses a combination of diesel/hydraulics
All-electric Solaris systems run off diesel generator when electric power is not available in the field
Electric frac fleets are expected to become more common and bring additional value to customers
Fuel savings from using natural gas vs. diesel
Longer run-time per day and fewer mechanical failure points
Potential for smaller footprint
By running Solaris’ systems off of electric power, the operator benefits from additional fuel savings and the operator, frac company and Solaris all benefit from improved uptime performance, reduced repair and maintenance expenses, and reduced emissions
17 electric frac fleets are expected to be in the market within the next few months (including fleets on order)
Solaris Sand Systems Can Utilize Power from Electric Frac Fleet Turbines for Greater Efficiencies
Key Takeaways Solaris System Tied into Electric Power
SOI Has Worked with Most of the Early Movers in the Electric Frac Fleet Industry
Generators normally on back of system no longer needed
58%
65%
75%
69%
59%
12%
37%
59%63%
53%
7
16
46
111110
0
20
40
60
80
100
120
0%
20%
40%
60%
80%
100%
2015 2016 2017 2018 2019
System Rental and Service Gross Margin % Adjusted EBITDA Margin % Average Fully Utilized Systems
18
Sustained Margins Over Cycles and Secular Growth
Source: Company data
Margin % # of Systems
50%55%
60% 59%
70%
US CompressionRental
IndustrialRentals
Premium DrillPipe Rental
Solaris SystemRental & Service
PremiumCompletion
Rentals
Hypothetical Scenarios
($ in Millions)Low
UtilizationMiddle
UtilizationHigh
Utilization
12/31/18 Gross PPE 330$ 330$ 330$ + Goodwill & Gross Intangible assets 23 23 23 - Kingfisher Transload Gross Investment (40) (40) (40) = Gross Investment in Fleet 313$ 313$ 313$
Divided by # of systems in fleet 160 160 160
= Initial cost per system 2.0$ 2.0$ 2.0$ + Maintenance capex over life of the system 0.6$ 0.6$ 0.6$ = Fully loaded cost per system 2.6$ 2.6$ 2.6$
2018 Contribution Margin per fully utilized system 1.2$ 1.2$ 1.2$ x Impact of Equipment utilization 70% 85% 95%- SG&A burden per system (0.1)$ (0.1)$ (0.1)$ - Cash taxes (0.1)$ (0.1)$ (0.2)$ = Annual After-tax Cash Flow per system 0.6$ 0.7$ 0.8$
After-tax payback in years 4.4 3.6 3.2 Source: Company dataNote: Companies used for rental margin comparison include AROC, URI, HRI, SPN and WHD
SOI cost <1% of Total Monthly Well
Cost
Utilization Impact on Payback Periods ($ in Millions)
Monthly System Revenue as % of Well Costs
E&P average cost of $6mm/well * 3 Wells/Month = $18mm/Month
Specialized rental businesses tend to be buried in larger companies in the oilfield services sector
Solaris margins are in line with other premium well-site rental businesses and not much higher than more commoditized/industrial rental businesses
Specialized rental businesses tend to have high margins on low dollar amounts of revenue relative to total spend, and targeted payback periods often look similar to other premium well-site equipment and service companies on a thru-cycle/normalized basis after accounting for asset utilization risk
Manufactures own specialized product; invests in own R&D/technology
Commoditized rental
Specialized Equipment Rental EBITDA Margins
Summary Points on the Specialized Rental Model
19
Rental Business Model Reflects Low Portion of Total Well Cost, In-Line Margins and Utilization Variability
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
1 YearTreasury
Russell2000
S&P500 XOP OIH SOI XLE 0.0x
1.0x
2.0x
3.0x
4.0x
5.0x
6.0x
7.0x
0%
20%
40%
60%
80%
100%
120%
140%
160%
180%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Focused on Operating Efficiency, Low Leverage and Shareholder Returns
20
Operating Cash Flow as a % of EBITDA (1Q16-4Q19) SG&A as a % of EBITDA (1Q16-4Q19)
Gross Debt / TTM Adjusted EBITDA (4Q19) Dividend Yield
Source: Company data, Bloomberg and FactSet as of 4/7/2020. Note: Peer group includes WHD, MINI, HRI, URI, SPN, NEX, NINE, PUMP, SLCA, HCR and AROC.
NEX shown pro forma for C&J / Keane merger by combining historical values.
Peer Avg
Peer Avg
Peer Avg Russell
2000XOP1-year
TreasuryS&P 500 OIH XLE
21
Market Leader: Industry leading market share of ~1/3 in well site sand handling equipment
Growth: New product introductions, such as our chemical systems, and continued innovation, such as software and automation, provide growth potential
No Debt: No debt on the balance sheet with >$1.40 per share cash balance as of December 31, 2019
Positive FCF: Positive free cash flow generation began in 2019
Dividend: Quarterly dividend raised 5% to $0.105/share in December 2019; Initiated dividend at $0.10/share in December 2018
Share buybacks: Repurchase program of up to $25 million announced in December 2019; retired 1.4mm shares with $7.3mm remaining authorization as of 2/14/20
Inside Ownership: Management team members are mostly original founders and own ~17% of the company
Solaris Investment Highlights
Appendix
(1) Federal and state income taxes, including $22,637 related to the Tax Act in the year ended December 31, 2017 and $0 related to Tax Act adjustments in the year ended December 31, 2018.(2) Represents stock-based compensation expense related to restricted stock awards with one-year and three-year vesting and options issued under our long-term incentive plan.(3) Deferred revenue related to full termination of a sand storage and transloading agreement; no deferred revenue balance remained as of December 31, 2019. (4) One-time cash bonuses of $3,100 in 2017 and stock-based compensation expense related to restricted stock awards with one-year vesting that were granted to certain employees and consultants in
connection with the Offering.(5) Other income related to the remeasurement of payables relate to the Tax Receivable Agreement includes ($21,936) as a result of the Tax Act.(6) Certain performance-based cash awards paid in connection with the purchase of Railtronix upon the achievement of certain financial milestones. Also represents reserve for deposits made to a supplier,
the majority of which was recovered.
EBITDA and Adjusted EBITDA Reconciliation
23
T hree m onths ended, T welve m onths ended Decem ber 31,
($ in 000s) March 31, 2020 Decem ber 31, 2019 Septem ber 30, 2019 June 30, 2019 2019 2018 2017 2016
Net income (loss) ($33,152) $25,334 $19,082 $22,509 $90,360 $85,952 $22,487 $2,803
Depreciation and amortization 7 ,114 7 ,050 6,908 6,622 26,925 18,422 6,635 3,7 92
Interest (income) expense, net (111) (141) 8 656 634 37 4 97 23
Prov ision for income taxes (1 ) (6,07 8) 4,894 3,7 03 4,158 16,936 12,961 25,899 43
EBIT DA ($32,227 ) $37 ,137 $29,7 01 $33,945 $134,855 $117 ,7 09 $55,118 $6,661
Stock-based compensation expense (2) 1 ,329 1 ,211 1 ,225 1 ,17 8 4,47 6 2,920 2,211 127
Loss on disposal of assets 68 80 99 7 1 463 153 498 - Impairment loss 47 ,828 - - - - - - - Severance 331 7 5 154 - 229 - - - Bad debt reserve 7 11 - - - - - - -
Transload contract termination (3) - (17 ,631) (3,204) (3,169) (27 ,138) (522) - -
IPO bonuses (4) - - - - - 896 4,627 -
Change in pay ables related to Tax Receivable Agreement (5) - - - - - - (23,022) -
Other (6) - - - - - 1 ,67 9 491 -
Adjusted EBIT DA $18,040 $20,87 2 $27 ,97 5 $32,025 $112,885 $122,835 $39,923 $6,7 88
EBIT DA and Adjusted EBIT DA Margins:
EBITDA ($32,227 ) $37 ,137 $29,7 01 $33,945 $134,855 $117 ,7 09 $55,118 $6,661
÷ Revenue 47 ,830 62,858 59,604 64,101 241,687 197 ,196 67 ,395 18,157
EBIT DA Margin -67 % 59% 50% 53% 56% 60% 82% 37 %
Adjusted EBITDA $18,040 $20,87 2 $27 ,97 5 $32,025 $112,885 $122,835 $39,923 $6,7 88
÷ Revenue 47 ,830 62,858 59,604 64,101 241,687 197 ,196 67 ,395 18,157
Adjusted EBIT DA Margin 38% 33% 47 % 50% 47 % 62% 59% 37 %
System Rental and ServiceGross Margin Reconciliation
24
T hree m onths ended, T welve m onths ended Decem ber 31,
($ in 000s) March 31, 2020 Decem ber 31, 2019 Septem ber 30, 2019 June 30, 2019 2019 2018 2017 2016
Sy stem rental and service revenue:
Sy stem rental 26,059 28,296 36,638 39,7 40 142,022 143,646 54,653 14,594
Sy stem serv ices 20,957 15,250 18,153 19,031 63,87 1 43,010 12,537 3,563
T otal sy stem rental and services revenue $47 ,016 $43,546 $54,7 91 $58,7 7 1 $205,893 $186,656 $67 ,190 $18,157
Sy stem rental and service operating costs:
Cost of sy stem rental 2,013 1 ,97 0 2,838 2,552 9,7 07 7 ,230 2,627 1 ,431
Cost of sy stem seriv ices 24,130 18,383 21 ,07 2 21 ,67 5 7 4,7 49 50,633 14,184 4,916
T otal cost of sy stem rental and services $26,143 $20,353 $23,910 $24,227 $84,456 $57 ,863 $16,811 $6,347
Sy stem rental and service gross m argin $20,87 3 $23,193 $30,881 $34,544 $121,437 $128,7 93 $50,37 9 $11,810
Sy stem rental and serv ice gross margin $20,87 3 $23,193 $30,881 $34,544 $121,437 $128,7 93 $50,37 9 $11,810
÷ Sy stem rental and serv ice revenue $47 ,016 $43,546 $54,7 91 $58,7 7 1 $205,893 $186,656 $67 ,190 $18,157
Sy stem rental and service gross m argin % 44% 53% 56% 59% 59% 69% 7 5% 65%
Supply chain buffer
Greater storage and proppant accessibility
More accessible unloading points
Enclosed system with fewer moving parts and dust suppression
Efficient use of space
Fully automated
Real-time data
Inadequate on-site inventory and offloading capacity
Complicated operations and expansive well site footprint
Opaque inventory information and limited communication
HS&E issues, including silica dust
25
Solaris’ Mobile Proppant Management System
Issues with Traditional Offerings
Our Solution
Traditional Sand Kings
Rolling Storage
Solaris’ Solution
Bringing Order to Chaos: Solaris Versus Traditional Technology
0
20
40
60
80
100
120
140
1Q13
3Q13
1Q14
3Q14
1Q15
3Q15
1Q16
3Q16
1Q17
3Q17
1Q18
3Q18
1Q19
3Q19
1Q20
E
3Q20
E
Dem
and
(MTP
A)
N.White & Regional Demand In Basin Demand
Recent Shift to In-Basin Sand Likely Continues
Source: Company data, Coras Research
Frac Crews Continue to Pump More Sand per Day
Source: Wells Fargo Securities
Well Logistics Complexity Driven by Volume Growth, Shift to In-Basin Sand, Frac Efficiency and Other Factors
26
Solaris Systems’ Are Ideally Suited for Increasing Sand/Trucks Per Well Site
-
10
20
30
40
50
60
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Jan-
17
Apr-
17
Jul-1
7
Oct
-17
Jan-
18
Apr-
18
Jul-1
8
Oct
-18
Jan-
19
Daily Trucks Per Frac Crew
Mill
ion
Lbs P
umpe
d Pe
r Day
Per
Fra
c Cre
w
Box-Carrying Trucks
Pneumatic/ Belly-dump Trucks
Illustrative 20 MM lb Completion
27
RAIL TO BASIN
TRANSLOAD STORAGE FACILITY
DELIVERY TO THE WELLSITE
WELLSITE STORAGE AND DELIVERY
SAND MINE
~10,000 tons of sand
~100 railcars
~10,000 tons of throughput
~400 truck loads
~2.5 million lbs / 6 silos; or
~5.0 million lbs / 12 silos
Solaris Provides Key Buffers and Data Along Supply Chain
andSolaris Lens®
Solaris Lens™
Proppant FlowSolaris Data
Solution
NO
RT
HE
RN
WH
ITE
SA
ND
SU
PP
LY
CH
AIN
Illustrative 20 MM lb Completion
DELIVERY TO THE WELLSITE
WELLSITE STORAGE AND DELIVERY
SAND MINE
~10,000 tons of sand
~400 truck loads
~2.5 million lbs / 6 silos; or
~5.0 million lbs / 12 silos
Proppant Flow
IN B
AS
IN /
RE
GIO
NA
L S
AN
D S
UP
PL
Y C
HA
IN
Lost buffer of inventory along the supply chain
®
®
®
®
Proppant Logistics are Bottleneck Prone; In-Basin Sand Increases Need for Wellsite Inventory Buffer
Silo
Shuttle Conveyor Belt
Gravity Dual Conveyor Belts
Blender
Generator
Base unit
Generator
Aerial View of SystemSilo Loading and Delivery Process
Silos
Electrically driven belts
Single point of control for the entire system
Six to twelve silos per System
Four fill tubes per silo
2.5 to 5 million lbs of inventory available at the blender
~50,000 pounds of proppant per truckload
Two issued patents, three utility patent applications and two provisional patent application relating to Systems, services and other technologies
Multiple redundancies built in (i.e. 4 fill tubes, dual belt, dual generators)
Shuttle Conveyor Belt
28
Solaris Patented System Design
$40
$20
$5 $80
$40 $125
$0
$25
$50
$75
$100
$125
MinegateSand Price
Trans-portation
SolarisSystem
TotalProppant Cost
Trucking / Demurrage
Savings 25%
Daily Completion Cost Savings
40%
Dust Control System Savings
15%
Labor Savings
10%
Inventory Loss Savings 5%
Fuel Savings 5% Lighting / Power Savings 1%
29Note: Analysis based on Management estimates; assumes 3-well Delaware Basin pad, 10,000 tons of proppant/well, 40 stages/well and ~500,000 pounds of proppant/stageImplied average monthly rental and service revenue per system in Q2 2018
Metric $ Amount / Figure
Average Horizontal Well Cost $6,000,000
Solaris Monthly Rental and Service Cost (1) $139,000
Average Number of Wells Completed per Month
3
Implied Solaris Cost per Well $46,333
Solaris System Costs <1% of Total Well Cost
Solaris System Costs ~25% of Total Economic Savings Produced
Solaris System Costs <5% of Total Proppant Cost
$46,333Solaris Revenue
$153,667Retained Value per
Well
Of ~$200,000/well total savings generated by Solaris systems, the customer retains ~75% of the benefit
Value Proposition to Customers:Trusted Solution and Low Cost Insurance Policy
30
Comparison of Containerized vs Solaris Silo Technology Options
Source: Company estimatesNote: Assumes any non-pneumatic truck is 10% cheaper, larger boxes average 5 min unloading time and smaller boxes average 8-9 min unloading time per truck
Boxes struggle to keep up with the pace of modern frac design volumes / hour
Reliance on constant forklift movements introduces:
Single point of failure risk
HSE risk
To achieve a similar 2.5 mm lb supply buffer offered by a 6-silo Solaris system, 60 larger boxes or over 100 smaller boxes would be needed in addition to a forklift working area
TechnologyBox A Box B Solaris Solaris
(2 smaller boxes) (1 larger box) Pneumatic System Belly dump System
Trucking Efficiency Comparison
Lbs / Well 20,000,000 20,000,000 20,000,000 20,000,000
Lbs / Truckload 46,000 42,000 50,000 54,000
Total Truckloads / Well 435 477 400 371
Avg Cost $ / Truck Trip $540 $540 $600 $540
Total Truck Cost $ / Well $234,900 $257,580 $240,000 $200,340
Trucking Cost / Four-Well Pad $939,600 $1,030,320 $960,000 $801,360
Max # Trucks Unloading Simultaneously 1 1 24 1-2
Max Trucks / Hour During Active Frac 0 0 24 4-10
Max Trucks / Hour During Downtime 7 12 24 4-10
Max Sand Volume Loadings - Lbs / Hour 306,667 504,000 1,200,000 540,000
Other Operational Comparison
Forklift Movements / Well 3,480 1,908 0 0
Forklift Movements / Pad 13,920 7,632 0 0
Labor / System (employees per shift) 3-5 3-5 1 1
Solaris Systems Have Trucking, Laborand Safety Advantages
31
1
2a
3
4
5
6
7
89
10
11 12
1313
1414
2c
2b
1 Water tanks2 Chemicals
2a Acid/frac tanks2b ISO tanks2c Totes2d Chem add unit
1
3 Hydration unit4 Solaris Silo System5 Blender6 High pressure manifold7 Pump trucks (horsepower)8 Zipper frac manifold
9 Frac stack10 Data van11 Wireline truck12 Pump down trucks (water)13 Fuel trucks14 Sand trucks
Well Site Overview12 Pack Zipper Frac
2d
2b
11